Turkey rallies: is the economy to follow?

As countrywide protests to denounce the failed coup attempt against the ruling Justice and Development Party (AKP) continued to sweep the nation last weekend, the main opposition Republican People’s Party (CHP) took to Istanbul’s iconic Taksim Square for the “Republic and Democracy Rally”. The rally brought together government and opposition supporters for the first time in recent years, with some leftist parties and groups like DİSK (Confederation of Revolutionary Workers’ Unions) also attendance.

Source: Bianet

The historic cross-party demonstration gathered together tens of thousands as Kemal Kılıçdaroğlu, leader of the CHP, announced the “Taksim Manifesto”.

The Manifesto was composed of 10 bullet points: praising people’s exercise of the “right to resist”, emphasizing secularism, the necessity of the separation of powers and the rule of law. Finally pointing to the importance of meritocracy in public recruitment and elimination of constitutional regulations. This has been praised as an important and moderate step towards normalizing Turkey’s domestic politics.

The rally in Taksim was uniquely supported by the ruling AKP. Prime Minister Binali Yıldırım assigned some of his most senior officials to attend the rally. Vice-Chair of AKP, Mehmet Müezzinoğlu, who was one such official, stated the party’s respect for the CHP and its supporters’ stance against the coup. “We are backing this democracy meeting”, he said.

President meets with party leaders

Meanwhile, President Erdoğan met with the leaders of three of the main parties in parliament, although notably excluding the Peoples’ Democratic Party (HDP). Binali Yıldırım of the ruling AKP, Kemal Kılıçdaroğlu of the CHP and Devlet Bahçeli of the Nationalist Movement Party (MHP) met with the President to discuss methods to solve the post-coup economic and political crisis.

Erdoğan’s historic meeting with Kılıçdaroğlu was seen by many as a sign of political bridge-building, as the two have engaged in numerous harsh exchanges in recent years, contributing to Turkey’s ever polarized political landscape.

However, the HDP’s exclusion from the meeting raises questions. HDP co-chair Selahattin Demirtaş voiced his criticisms of this move, arguing that ignoring the HDP shows a lack of comprehension of the consequences of the coup attempt.

Stressing that they are a party with six million votes which opposed the coup just like the others, Demirtaş argued that, “What triggered the coup attempt was the understanding that the Kurdish question could be solved by military means. Ignoring the HDP and agreement of three parties will not lead to any solutions”.

“Economic recovery likely to continue”

Turkey’s economy has started to rally after the failed coup attempt caused an economic meltdown, with stocks depreciating, the Lira plummeting to record lows and fears over foreign capital flight. The credit rating agency Standard and Poor’s (S&P) has however downgraded Turkey’s credit rating from BB+ to BB with a negative outlook. Additionally, Moody’s is reviewing Turkey’s status with the possibility of downgrading its investment grade to Junk.

Can Cemgil, a political economist from Istanbul Bilgi University discussed the impact of this downgrading with Independent Turkey, arguing these ratings further hurt Turkey’s economy.

This came as a shock as many were reading positive prospects for Turkey’s economic recovery prior to the coup attempt, due to steps towards rapprochement with Russia and Israel. Especially given expectations of a surge in the number of tourists based on this rapprochement: Turkey’s tourism sector has been crippled by domestic and regional political instability.

“The rapprochement with Russia and Israel could have made up for part of the losses suffered by the tourism sector, if the coup had not taken place”, Cemgil told us.

“The general mood of insecurity and anxiety caused by the coup attempt itself, as well as the ensuing state of emergency, decrease any possible remedy from domestic tourism”, Cemgil told Independent Turkey.

“As we are more than halfway through the summer tourism season, no rapprochement can prevent major losses in the sector”, he added.

The recently declared state of emergency and ongoing purges of public institutions have also caused fluctuations and insecurity in Turkey’s short term economic outlook. However according to Cemgil, “The assumption that investment appetite and effective functioning of markets requires democratic institutions and practices is an extremely persistent myth”.

“Countless examples have showed time and time again that particularly under neoliberal authoritarianism, markets function productively”, he added.

Cemgil suggested that the state of emergency, therefore, may well be used to push forward with controversial economic reforms and the government’s so-called ‘mega-projects’, without legislative or judicial checks.

Members of government such as the Prime Minister – who recently declared that the economic impact of the coup attempt would be no greater than that of the jet crisis between Turkey and Russia – have tried to ease fears in the foreign market. Deputy PM Mehmet Şimşek, formerly the Minister of Finance, has also repeatedly attempted to quell nervous foreign investors, stating on his Twitter account that: “We don’t expect any lasting economic fallout.”

According to Cemgil, although Turkey has deeper economic problems, they are ameliorated by negative interest rates in Europe and hesitancy on the behalf of the Federal Reserve to increase interest rates. This allows for a restarted inflow of financial funds to Turkey where they can still enjoy positive yields.

“Considering the dependence of Turkey’s economy on external funds,” Cemgil says, “this is the major indicator against which one can judge its short and long-term prospects.”

“The Prime Minister has to convey positive messages and underestimate the impact of the coup on Turkey’s economy” says Can Cemgil. “But there’s truth in the claim that a recovery is taking place although not at a very stable and fast fashion.”

More time is needed to see how the infant rapprochement of the AKP and CHP, so recently bitter foes, will influence this ongoing trend in economy recovery. However, given the ongoing impact of government purges on foreign investment, corporate travel bans and a general nervousness on behalf of foreign business and governments, the AKP will need to show some strong indicators of moderation for this trend to continue in any meaningful way.